The Create and Grow Law and its benefits for SMEs

The Create and Grow Law and its benefits for SMEs

With the publication of the technical draft of the Create and Grow Law, one can guess the necessary requirements for the implementation of the compulsory electronic invoice between companies and freelance workers of the country.

The Law aims to facilitate the standardization of electronic invoicing, improving its usability in B2B relations and with third parties, such as Public Administrations or financial system entities. It also aims to balance relations between small and large companies in the market.

One of the problems caused by the gradual growth of companies, particularly SMEs, is late payment, known as the failure, to meet a payment obligation on time. In too many occasions the maximum payment term of 60 days for private companies, established by Law 15/2010 of July 5, 2010, is exceeded.

With the current legal system, it has been proven that large companies have a position of strength over small companies, since SMEs must face the uncertainty generated by late payment and assume the extra financial cost it entails. These practices have a negative influence on their liquidity and therefore on their projects, investment capacity and growth, in addition to the lack of solvency that this implies for them.

Although Law 3/2004 criminalizes late payments, very few complaints are filed due to the possibility of SMEs losing the legal process, since they must assume the legal costs. All this leads to an asymmetry of bargaining power between customers and suppliers.

The technical draft of the Create and Grow Act specifies the requirements to be met by electronic invoices, such as the date of issue and date of payment or ensuring the inalterability of the invoice once it has been issued. In order to encourage a positive practice in complying with the stipulated payment times, bonuses have been announced for companies that comply with them, as well as priority access to public subsidies.

The Create and Grow Law hopes to fight against commercial payment default, promoting a responsible culture. To achieve this, the regulation assures the compliance of different stipulated obligations and therefore creating a balance of strength between large and small companies.

This eagerness to achieve the same opportunities, regardless of a company’s size is mostly due to the fact the the majority of the business network of the country is made up of small to medium-sized companies and there is a need to assure that they don’t have solvency problems because of late payment for the good economic development of all enterprises.